Citigroup Explains Why First Solar Is So Screwed

Shares of First Solar are plunging today on news that its CEO has unexpectedly resigned.Citigroup explains the dire situation at the company:

Layoff may be coming – Our work suggests FSLR may be facing a layoff of up to10% owing to the reality that it may have to run factories at less than full utilization during the next several Qs. This, in part, may have led to the management change. Pricing checks support very low “core” EPS in the near term – Our work indicates customers are pushing back hard on prior contracts (see our SPI note Alt. Energy Beat: Solar Alert). Specifically, at least two large customers are indicating to us they will only stand by volume commitments if FSLR’s module pricing is in the $0.75-0.80/W range when pricing resets in 1H:12. This leaves very little room for FSLR’s opex and implies “core” EPS could approach zero during this period, depending on where final pricing negotiations shake out.